On Monday, a federal appellate court rejected a bankruptcy filing from Johnson & Johnson, in an attempt to protect itself from thousands of lawsuits claiming its talcum-based powder causes cancer. The Third Circuit Court of Appeals ruled the pharmaceutical giant erred when it put its subsidiary LTL Management into Chapter 11 bankruptcy. J&J created the subsidiary in 2021 to specifically handle the thousands of lawsuits against its baby powder. The court ruled “only a putative debtor in financial distress” is able to file for bankruptcy protection. Monday’s ruling means the subsidiary is ineligible to file for bankruptcy protection from some 38,000 lawsuits. Had it ruled differently, the majority of lawsuits against the company would have been protected from financial penalty.

The U.S. Supreme Court declined to hear an appeal by Johnson & Johnson in June 2021, letting a lower court verdict stand and awarding nearly $2.1 billion to a group of 22 women in a class action lawsuit. The women contended the talcum powder contained asbestos and was the cause of their ovarian cancer. Overall, the company faces costs of about $3.5 billion related to verdicts and settlements.

The Jersey-based company originally said in 2020 that it was discontinuing the talc-based baby powder product, amid the thousands of claims filed by customers in North America alleging it causes ovarian cancer and other illnesses. J&J then said last August it would end sales of the product at some point this year.  Johnson & Johnson said in a statement Monday: “As we have said from the beginning of this process, resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders. We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer.”

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